Nifty Metal index set for biggest weekly fall since October 2008

JSPL, Hindalco, Vedanta, SAIL, JSW Steel and Tata Steel from the Nifty Metal index have seen their share prices plunge in the range of 14 per cent to 18 per cent during this week

The Nifty Metal index is set for its biggest weekly fall in more than a decade as shares of metal companies remained under pressure on Friday on concerns of demand slump due to the coronavirus outbreak in top consumer China.

At 11:19 am, the Nifty Metal index, the top loser among sectoral indices, had slipped 6 per cent. The index has plunged 13 per cent during the current week. Earlier, in the week ended October 26, 2008, Nifty Metal index had tanked as much as 25 per cent, data shows.

During the week, Jindal Steel & Power (JSPL), Hindalco Industries, Vedanta, Steel Authority of India (SAIL), JSW Steel and Tata Steel from the Nifty Metal index have seen their stock price plunge in the range of 14 per cent to 19 per cent.

“Coronavirus is likely to keep up the pressure on domestic steel prices in the near term as demand pick-up has so far belied expectations. Besides, the landed price of hot-rolled coil (HRC) from Japan and South Korea is at a discount of 3–4 per cent to domestic steel price. This might attract greater imports into India. We will watch out for developments regarding the resumption of downstream activities in China,” analysts at Edelweiss Securities said in metals and mining sector update.

Among individual stocks, Hindalco Industries slipped 6 per cent to Rs 158, its lowest level since January 9, 2017. The stock of the leading producers of aluminium and copper was down 17 per cent during the week.

The fall in Hindalco’s stock price mirrors the decline seen in the US downstream aluminum rolled product companies (Arconic, Constellium and Kaiser) on worries about a wider spread of the COVID-19 into Europe and the US and the resultant impact on consumer spending and demand for rolled aluminum products across cans, autos and specialties, according to analysts at JP Morgan.

The stock offers an attractive risk-reward, given its lowest-cost aluminum producer status; strong earnings visibility in downstream rolled products; organic capex well below OFC generation; and valuations at 5.4x EV/EBITDA, a 30 per cent discount to its long-term average, the brokerage firm said with ‘overweight’ rating on the stock.

COMPANY	LATEST	ONE-WEEK BEFORE	LOSS(%)
JINDAL STEEL	157.15	193.40	-18.7
VEDANTA	117.00	142.35	-17.8
HINDALCO INDS.	158.25	189.95	-16.7
S A I L	35.45	42.15	-15.9
JSW STEEL	237.30	281.80	-15.8
NATL. ALUMINIUM	33.15	38.80	-14.6
TATA STEEL	380.80	443.55	-14.2